Do homework before you make a bid on a house A BUYER'S GUIDE

Making an offer on a house and negotiating price and terms can be alternately demoralizing and exhilarating for buyers -- demoralizing when the seller laughs at your carefully crafted offer, exhilarating when you call their bluff and they sign the sales contract.

A good real estate agent or attorney who can keep you calm during the process is indispensable.

ZTC Negotiating a sale usually follows a pattern. You make an offer and put up earnest money to show you are serious. The seller makes a counter offer. You agree to their offer, you both sign the sales contract. Financing and settlement begins.

But the pattern has endless variations. Counteroffers may be made to counter offers. Another offer may sneak in and blow the deal. Buyers and sellers both must be flexible in their demands or neither may ever get what they want.

Before you make a solid offer on a house, agents say you must have a plan and lots of information to back up your actions.

* First, set your price and terms.

Identify the ideal price you would like to pay for the house, what you think it is worth based on comparable prices of other homes in the area, and the highest amount you'd pay. You don't need to tell your agent what your highest bid would be. Some real estate investors say buyers who disclose that price end up paying that price.

Also set the earliest and latest dates you would agree to settle, what financing arrangements you would make, and other terms of the sale important to you.

You can find out what comparable homes are selling for from your agent or public tax records at the county courthouse or library. If the seller's asking price is close to the sales price of other homes recently sold in the area, you could still make your first offer at about 10 percent below the asking price. Most reasonable sellers expect some negotiation and set their prices higher than what they know they'll get. Some agents say the sale price of a house in the Baltimore area is typically 94 or 95 percent of the asking price.

Your first offer does not have to be acceptable to the seller, unless other buyers are hot for the property. The seller can always make a counteroffer. If the seller rejects your first offer with no counter, you can still make a higher bid.

The more you know about the seller's needs, the more leverage you have. If you know, for instance, the seller needs to move quickly, you may be able to ask for a slightly lower price in exchange for a closing date that suits them.

* Now make a formal offer.

In Maryland, buyers typically make a bid with a contract of sale. The offer describes in detail all the terms of the purchase: what you'll pay, when you want to settle, and conditions that apply to the deal.

Every area has a standard real estate sales contract many agents use to present a formal offer. But some agents, buyers' agents in particular, say the standard contract isn't fair to buyers.

You don't have to use the standard contract the real estate agent provides. You may modify it or draft one with the help of an attorney.

Make sure the contract has contingency clauses that give you the right to back away from the deal if you need to. You should have the right to inspect the property before settlement, and cancel the contract if the house is not in the same condition as it was when you agreed to buy it. And if you must sell another house first or get financing to buy the new place, you should be able to back out with no loss if your other house doesn't sell or you don't get the loan.

Make certain you understand every term in the contract. Don't be bullied into rushing this part. If you don't feel comfortable with a provision, get someone to explain it. If it still doesn't sound right, see if you can get the seller to agree to different language.

Along with the offer, you'll need to put up "earnest money," an amount of your choosing that tells the seller you are serious about buying. That money is usually held in a trust account until the deal is ratified. You get the money back if the deal falls through because of a provision in the contract. You lose the money if you just back out.

Agents say there is no set amount to give with the offer. William E. Lamb Jr., a broker with Buyers 1st Realty in Annapolis, said he encourages his buyers to put down as low as 1 percent of the offer price.

"There are things that happen to people from the time they sign a contract and they go to settlement," he said. "It's best to cut bait and walk away, and have as little money sitting on the table as possible."

The contract is binding only when both parties have signed the same version. If you've made an offer, but the seller hasn't agreed to it, the seller may still accept offers from other interested buyers.

You can bargain for terms or price or both. If the seller wants you to increase your offer or move up the closing date, bargain for something in return: window coverings, new carpeting.

If you can't get the seller to budge on either price or terms, perhaps that particular house isn't worth haggling over. But once the seller signs your offer, the house is technically off the market and you are bound to uphold the contract.